Tuesday, May 15, 2012

Can you violate a patent by planting some seeds?

Farm-fresh infringement: Can you violate a patent by planting some seeds?
Timothy B. Lee
Full Article:

Can a farmer commit patent infringement just by planting soybeans he bought on the open market? This week, the Supreme Court asked the Obama administration to weigh in on the question. The Court is pondering an appeals court decision saying that such planting can, in fact, infringe patents.

In 1994, the agricultural giant Monsanto obtained a patent covering a line of "Roundup Ready" crops that had been genetically modified to resist Monsanto's Roundup herbicide. This genetic modification is hereditary, so future generations of seeds are also "Roundup Ready." Farmers had only to save a portion of their crop for re-planting the next season, and they wouldn't need to purchase new seed from Monsanto every year. The company didn't want to be in the business of making a one-time sale, so when Monsanto sold "Roundup Ready" soybeans to farmers, it required them to sign a licensing agreement promising not to re-plant future generations of seeds.

However, farmers remain free to sell the soybeans they grow in the commodity market, where most are used to feed people or livestock. Roundup Ready soybeans have become extremely popular; they now account for 94 percent of all acres planted in Indiana, for instance. Vernon Bowman, an Indiana farmer, was a customer of Monsanto who realized that Roundup Ready soybeans had become so common in his area that if he simply purchased commodity soybeans from a local grain elevator, the overwhelming majority of those soybeans would be Roundup Ready. Commodity soybeans are significantly cheaper than Monsanto's soybeans, and they came without the contractual restriction on re-planting.

So Bowman planted (and re-planted) commodity soybeans instead of using Monsanto's seeds. When Monsanto discovered what Bowman was doing, it sued him for patent infringement.

Patent protection or freedom to farm?

Bowman argued his use of the seeds is covered by patent law's "exhaustion doctrine." This doctrine, like copyright law's first sale doctrine, holds that a patent holder's rights in a particular product are "exhausted" when the product is sold to an end user. The Supreme Court beefed up the exhaustion doctrine in 2008 when it held that LG could not "double dip" on patent licensing fees—charging both chipmaker Intel and OEM Quanta royalties for the same chip.

Bowman argued that when Monsanto sold seed to a farmer, it exhausted its rights not only to that specific seed but to all of the seed's descendants. Since Bowman wasn't required to sign a licensing agreement before buying commodity seeds, he argued that he was free to plant the seeds and even to save and re-plant each season's crop for future seasons.

But Monsanto countered that each new generation of seeds is a separate product and thus requires a separate patent license. In effect, Monsanto contends that Bowman is illegally "manufacturing" infringing soybeans...

Last year, the United States Court of Appeals for the Federal Circuit ruled, as it had on several previous occasions, that patent exhaustion did not cover second-generation seeds. The Supreme Court has now asked the Solicitor General, the official in charge of representing the Obama administration before the Court, to weigh in on the case...

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